1. This is a suit brought by the plaintiffs, who were carrying on business at Berhampore, against the late Rajah of Kallikotta to recover certain moneys due on an alleged settlement of accounts entered into in June 1906 together with subsequent advances. The case is defended by the Court of Wards on behalf of the minor Rajah, and in the written statement they plead that this settlement of account of June 1906 was entered into in circumstances which render it not binding on the Rajah and which they characterise as fraudulent. And in paragraph 13 they take exception to various items of charge which are included in the settlement of Exhibit E. The Subordinate Judge has written a very careful judgment, but so long and so involved that it was difficult for us to understand it until we had examined the whole of the evidence for ourselves and, therefore, was of much less assistance to the Court than it would otherwise have been.
2. Now there can be no doubt that he Court will not hold a party to a settlement which has been obtained from him under improper circumstances and that it will allow him to surcharge and falsify items which have been inserted erroneously and which are not really due, when what the parties contemplated was merely to ascertain what was actually due, as distinct from a case in which they agreed to accept a lump sum in settlement of their differences. These principles are well illustrated by two cases which have been cited before us, M'Kellar v. Wallace 5 M.J.A. 372 : 8 Moo. P.C. 378 : 1 Equity Rep. 309 : 1 Bar. P.C.J. 453 : 18 E.E. 936 : 97 B.B. 62 : 14 K B. 144 and the well-known case of Williamson v. Barbour 9 Ch, D. 529 : 50 L.J. Ch. 147 : 37 L.T. 698. The Subordinate Judge has found that the settlement effected in this case in June 1906 between the plaintiffs and the Rajah is one which is not binding upon him and we agree with that decision.
3. The Rajah was a hopeless spendthrift who succeeded to the zemindari in 1899, and within four years had not only got through the ten lakhs balance handed to him on attaining majority, but had incurred fresh debts to the extent of twenty-two lakhs of rupees, and between that and the date of the present settlement had incurred further lia bilities of about eleven lakhs of rupees, which he was seeking at the time of the settlement to raise from the same English lenders who had advanced the money to meet the 22 lakhs I have already mentioned. At the time of the settlement his private affairs were largely in the hands of one Chamo Patuaik who was described as his personal assistant: and the evidence is that at this time the plaintiffs were beginning to press for payment to them and to threaten suits, and also that the Rajah was preparing a statement of his liabilities for the English lenders with a view to raising a further loan to meet his liabilities. It was quite proper in those circumstances that there should be a settlementprovided it was a fair one. The evidence is that three clerks of the plaintiffs, the 1st, 2nd and 3rd witnesses for the plaintiffs, and Chamo and another, the 1st and 2nd defence witnesses on behalf of the Rajah, met at the Rajah's house in Berhampore in his absence and the accounts were produced on both sides and this account, Exhibit E, was drawn up. The Rajah who had been spending some of his time on an island returned to his residence at Rambha on the 20th June 1906, and his diary records that his personal assistant arrived there at 6 o'clock, and it is the case for the plaintiffs that the settlement was signed by the Rajah that same evening at 8 o'clock. The diary mentions that the Rajah was at that time suffering from a headache but says nothing about the settlement. Much reliance is placed by the plaintiffs on their evidence that the Rajah himself scrutinized the accounts before signing. But we attach very little importance to it, having regard to the character of the man and the disorder into which he had allowed his affairs to fall, We think that there is very little doubt that such scrutiny was merely a formal one; and that is borne out by an examination of the character of the settlement which he was induced to enter into.
4. The defence questions in paragraph 13 of the written statement various items in this settlement and all but one of them have been pressed before us.
5. The first point we propose to deal with and it is one of the most important--is the question of the rents due by the plaintiffs to the deceased Rajah. It is in evidence that at the time that the Rajah began to order goods from the plaintiffs, he gave them a preference over other competitors and granted them a lease of a number of his villages and they were allowed to renew this lease from year to year. Two questions arise as to this rent. In the first place, the defence objects that no credit at all has been given for the rent of one of these villages, the Jillunda village, for fasli 130; and secondly-this is. much more important-it objects that no credit is given in the accounts for the amounts of rents due by the plaintiffs as they fell due so as to go in reduction of the indebtedness of the Rajah on the other side, but that it is only the sum total that is credited at the date of the settlement at an under-value, whereas according to the defence the understanding was that these rents were to goin satisfaction of the Rajah's indebtedness to the plaintiffs. The Subordinate Judge has found that the course of dealing between the parties shows that there was such an understanding between the Rajah and the plaintiff; and on a very careful consideration of the evidence and the elaborate arguments which were addressed to us, we agree with that conclusion.
6. But it will be convenient in the first place to deal w ith the question of the rents of the Jillunda village for fasli 1310. The plaintiffs case is that the rents of that village for that fasli were remitted by the Rajah, and the same evidence as regards this fasli which goes to establish the course of dealing as to the crediting of these rents goes also, in our opinion, to confirm the story of the plaintiffs in that respect. Accordingly we are not prepared to agree with the Subordinate Judge that the plaintiffs should be debited with the rents of the Jillunda village for Fasli 1310.
7. The oral evidence of the sheristadar, the 3rd defence witness, as to the rents is that no attempt was made to collect these rents from the plaintiff under instructions from the Rajah, because there was an understanding that they were to go in discharge of the Rajah's debts, andthis is probabilized by the facts that when Mr. Dodsworth, the agent of the European lenders, insisted that a large portion of the rents should be paid in cash to him to secure the necessary payments which had to be made by the Rajah the plaintiffs ceased to supply any further goods to the Rajah. There is also this most important and significant fact that the plaintiffs in this case have suppressed the whole of their accounts and simply put Exhibit E before the Court and refused to support it either by any documentry evidence of the 3rd plaintiff himself, who was not asked to go into the box. However, the oral evidence of the sheristadar is, in our opinion, entirely corroborated by the documentary evidence with regard to the Estate accounts. Kaoh year the books were opened showing the demands and the collections for the villages constituting the zemiwlari, not only the Jillunda village but all the villages of the zemindari, and the duty of making these demands and collections was in the sheristadar and the Estate office. It appears not only from the oral evidence, but on the books also, that the Estate office never collected anything at all during these years in respect of these villages and it is impossible to come to any other conclusion than that this was in pursuance of an understanding between the parties. The case of Fasli 1810, the first year, is referred to in Exhibits 130, 131 and 132; and they show that the total demand for all the villages except Jillunda was Rs. 28,940-10-0 (Exhibit 130, page 322). The exclusion of any demand for the village of Jillunda is, in our opinion, a sufficient corroboration of the plaintiffs' story that there was a remission in respect of that. Then Exhibits 131, 131(a), 131(b) and 131(c), the ledgers of the defendant, show that three successive sums of Rs. 3,000, Rs. 7,000 and Rs. 18,960, making in allRs. 28,960, are entered as 'for discharging loan debts.' And Exhibit 1 30 (a) shows that a balance of Rs. 19-6-0, which is the excess of the debts over the demand for these villages, viz., Rs. 28,960-10, was credited to the plaintiffs. It says 188. Pertaining to Madura Sahu for Fasli 131-0 - Attagadu Talnq. Palisara Mutah, Bajiria village--M lease, Rs. 19-6-0.' This evidence, in our opinion, shows an adjustment for this fasli.
8. But the case is even clearer with regard to the subsequent faslis. In Fasli 1311, Exhibits 103 series show the demands for the villages leased to the plaintiff and no collections at all. In 1903 with a view to borrowing from these English lenders the Estate accounts were audited by a Calcutta firm, and they contain a pencil entry which is sworn to have been made, and was apparently made, by the auditor, 'held against a. debt due from the Rajahs'. So that it appears that in 1903 the Estate office gave this explanation to the auditor as the reason why no collection had been made in respect of that village.
9. The state of things was exactly the same with regard to Fasli 1312 until just before this settlement was made in June 1906. It was only when Mr. Dodsworth began to look into the Rajah's affairs that there was correspondence (Exhibits 87-a and 87-6).as regards the crediting of these amounts in April 1906. As regards Fasli 1313, Exhibit 85 directs the adjustment of the rents towards the lessee's debts which was carried out about the end of that fasli in Exhibit 92 (page 173).
10. With regard to Fasli 1814 that was the fasli in which Mr. Dodsworth, the agent of the English lenders, insisted on a payment of Rs. 20,000 in cash in respect of this rent by the plaintiffs; a balance of Its. 8,376-14-K was adjusted on a deduction of the Rs. 20,000 actually paid to Mr. Dodsworth. As regards the rents of Fasli 1315, which according to the plaintiffs' own case fell due in February, no credit at all was given in this account, Exhibit E, in June 1906 though the whole rent was then due. Mr. Dodsworth had asked for Rs. 10,000, but that left a balance of Rs. 6,661 for which credit should have been given. The plaintiffs' case is that this balance was adjusted by a payment of Rs. 4,000 under a promissory note Exhibit LLL, and a further payment of Rs. 2,000 odd at Cuttack. The Subordinate Judge has not accepted this explanation and says thatit isnotshownwhy the promissory note should have been taken from the Bajah for money which was actually due to him. The alleged payment of Rs. 2,000 is not borne out by any documentary evidence, and we are not prepared to differ from the Subordinate Judge on this point. On the whole, we have come to the conclusion that the course of dealing found by the Subordinate Judge has been proved to exist and that the plaintiffs were not pressed for payment of the rents until Mr. Dodsworth's time, because there was an understanding between them and the late Bajah that the rents should go towards the satisfaction of his liabilities to them for goods supplied and money lent; and we think that this man Chamo was perfectly well aware of this arrangement and that he was not acting honestly towards his employer when he drew up this account Exhibit E.
11. Dr. Swaminadhan, for the respondent, says that if the account be re-taken by debiting the plaintiffs witli the amounts due from them for the rents of these villages as on the dates on which they fell due, it will show a larger sum due to his client than the Subordinate Judge has awarded him. He has not appealed from the finding of the Subordinate Judge. However that may be, if the defendant so desires the account will have to be re-opened and taken on that basis.
12. Coming now to the other items in Exhibit E which have been questioned before us, item No. 11 relates to a promissory note, Exhibit L, dated the 22nd March 1904, which, was executed by the late Bajah in favour of the plaintiffs bearing interest at 12 per cent. The plaintiffs in this account have charged 18 per cent, on the amount which they say was paid, namely, Rs. 2,172. There is absolutely no justification for that charge. They relied upon a liookimi of the Bajah, but no hoohum has been produced. The defence denies that a sum of Rs. 2,172 was ever paid and says that only Rs. 1,000 was paid. Exhibit 5, dated the 21st March 1904, that is the previous day, shows that it was intended that Rs. 1,000 should be paid and Rs. 12,000 retained. The Subordinate Judge has discredited the evidence of any further payment; and no accounts are produced to show any such further payment. None such is shown in the accounts of the defendant. The oral evidence is somewhat conflicting, but we are not prepared to differ from the conclusion at which the Subordinate Judge has arrived. Then not content with charging 18 per cent, instead of 12 on what they actually advanced in this account, the plaintiffs have actually charged interests at 9 per cent, on money which they admit they never advanced at all, namely, a sum of Rs. 10,828. We are unable to accept their explanation as to this. As regards item No. 11, the actual payment should be taken to be Rs. 1,000 and it must bear interest only at 12 per cent, and the interest charged in respect of the unpaid amoun t must be disallowed. As to this we confirm the judgment of the Subordinate Judge.
13. We come next to item 20, a payment of Rs. 6,000, which is alleged to have been paid on the 3Cth November 1905 under a private order of the Bajah of the 26th November for the purpose of re-paying the debt due to the plaintiffs by Chamo' No order is produced nor is any receipt produced. The Subordinate Judge has found that it is unlikely that such a payment of such a large sum would have been made at the time, when the Bajah was in embarrassed circumstances and when owing to Mr. Dodsworth's action it was no longer possible for the plaintiffs to retain the rents of the villages as against the moneys advanced by them. The plaintiffs rely on the fact that in a letter, Exhibit 114, subsequent to Exhibit E, no objection was taken to this item by the Rajah. This letter was drawn up under Mr. Dodsworth's superintendence and having regard to the character of the Rajah and his want of acquaintance with his affairs wo attach no importance to it. We are not prepared to differ from the Subordinate Judge in disallowing this sum of Rs. 6,000.
14. Item No. 22, a payment of Rs. 1,500 a little later on the 15th December 1905, stands on the same footing. There is a receipt by Chairio, Exhibit X of the 15th of December 1905, and the plaintiffs compare it with a similar receipt, Exhibit W, for a payment on the 20th August 1905; but as pointed out for the respondent Exhibit W bears the Rajah's initials, whereas Exhibit X does not. We are not prepared to differ from the Subordinate Judge as to this item.
15. We now come to the last item in Exhibit E of Rs. 25,000 and a further claim for an additional Rs. 25,000, as to which we are constrained to say that the conduct of the plaintiffs is shown to have been grossly fraudulent. As I have said, this settlement was being drawn up not only to satisfy the plaintiffs, but also in order that it might be furnished to Mr. Dodsworth and the English lenders and their advisers as evidence of the further liabilities of the Rajah, which it was contemplated should be discharged by means of a fresh advance from the English lenders. Exhibit I, which was executed on the same day as Exhibit E, shows that this man Chamo had induced the Rajah to promise him a remuneration of Rs. 25,000 for his services. Come at the end of Exhibit E Rs. 25,000 is entered in the Rajah's handwriting as having been paid by his order 'the other day', i.e., a few days before. It is admitted that the entry made a few days before is in the Rajah's own handwriting. It is 'admitted that no such payment was made a fe>' days before. The inference we draw is that that entry was put in for the purpose of inducing the lenders to advance a sufficient sum to cover not only the indebtedness of the Rajah to the plaintiffs but also this further sum of Rs. 25,000 which, according to Exhibit I, was to be paid to Chamo.Ex-hibit Q which is dated the next day is an order by the Rajah on the plaintiffs to pay Chamo Rs. 25,000 almost in the terms of Exhibit I. The plaintiffs' case is not that they paid Chamo at onoe, but the case with which they came to Court but which their Counsel was constrained to abandon was that this Rs. 25,000 entered in Exhibit E was agreed to be paid to them as bonus or compensation for some loss which they had sustained in connectton with the lease, a story which is not only unfounded but in, absolute contradiction with the admitted documents Exhibits I and Q. One cannot help wondering that it should have been thought worth while to put such a story before the Court, seeing that it can have no effect whatever except that it stamps the plaintiffs' case with fraud. However, that charge was not pressed before us. The plaintiffs sought to rely.on an alleged subsequent payment of Rs. 25,000 to Chamo pursuant to this order Exhibit Q. We entirely agree with the Subordinate Judge that no such payment was ever made. It, is not in the least likely that in the Rajah's then condition these plaintiffs would have been willing to advance such a large sum as Rs. 25,000 to Chamo. What was really intended, we doubt, was that f that sum was to be paid at all, it was to be paid out of an advance to be made by the English lenders to meet the alleged indebtedness of the Rajah to the plaintiffs. The whole thing was only a device for the purpose of getting from the English lenders the Rs. 25,000 which, it is possible, the Rijah was then willing to pay to Chamo as the remuneration for his supposed services. The receipt, Exhibit R, produced by the plaintiffs was no doubt signed by Chamo. He was summoned for the plaintiffs as well as the defendant, and was disbelieved by the Judge. The cross-examination of Chamo shows conclusively that no such sum was ever paid to him. He could not say what he had done with it or give any explana-t'on at all. He had to admit that he was very shortly afterwards in peril of arrest and in great difficulty and he was found living in miserable circumstances when his evidence was taken on Commission. We have no hesitation whatever in agreeing with the Subordinate Judge that this sum of Rs. 25,000 was not paid as alleged by the plaintiffs. Subsequently the Rajah countermanded the order : but it is sufficient for us to find that no such payment was ever made. As I have already said, the other claim of Rs. 25,000 has not been pressed before us on appeal.
16. The only other item is an alksged credit payment of Rs. 4,000 by the Rajah, for which it is said the plaintiffs have failed to give him credit. There is no evidence before us of such a payment though it may have been made. There is a letter which says that such a payment was made (Exhibit 3). The recital in that letter may or may not be true, but it is certainly not legal evidence of the payment of Rs. 4,000. Therefore, we must disallow this claim. The decree must be modified by disallowing the defendant credit for that sum of Rs. 4,000.
17. The result is that we differ from the Subordinate Judge both as to this item of Rs. 4,000 and as to the Jillunda village and also as to the way in which the account of the rents of the villages has been taken. We think that if the defendant so desires, the account must be so re-taken crediting the defendant with the amounts of the rents for these villages as they became due. Otherwise the appeal is dismissed with costs.
18. This appeal having been posted to be spoken to on the 3rd, 4th and 5th of February, the Court (the Chief Justice and Hannay, J.) delivered the following.
19. Judgment.--On the minutes of decree we are of opinion first of all that the plaintiffs are entitled to be credited, as was contended before us yesterday, with interest on the goods supplied by them on the expiry of three months from the dates of their bills. As to the question of the appropriation of the amounts which we have directed to be credited to the defendant in respect of the rents due to him by the plaintiffs, namely, whether the appropriation is to be in.the first place towards any interest due at the time and only subsequently in discharge of the principal we have been referred by Mr. Sarma to two decisions, one of the House of Lords in Gory, Brothers of Go., y. Owners of the Turkish Steamship Mecca', The Mecca' (1897) A.C. 286 : 66 L.J.P.C. 86 : 76 L.T. 579 : 45 W.R. 667 : 8 Asp. M.C. 266 and' the other Seymour v. Pickett (1905) 1 K.B. 715 : 21 T.L.R. 302. These cases appear to lay down as the law in England that, when the debtor has failed to exercise his right of appropriating the payment himself, it is open to the creditor to do so up to the very last date and even, in the course of the trial, unless something has happened which renders it inequitable to allow him to do so. In the course of these judgments their Lordships point out that the intention of the creditor is to be gathered from his conduct, and that one way of ascertaining that intention is from accounts which he may have rendered. In the present case Mr. Sarma relies upon Exhibit E, the account which was presented to the Rajah by the plaintiffs, which we have held should be re-opened. In that account the plaintiffs show the principal and interest due to them on all the debts up to 21st March 1906 as Rs. 1,72,000. They then deduct from this the amount for which they had to give credit for the rents due by them and they subsequently charge interest on the balance due from the 21st of March until the date of the settlement i.e., the 20th June. If they had appropriated the interest in the way contended for by the other side, the figures would be quite different. We think this is a sufficient indication of the intention of the creditors to make the appropriation towards interest in the first place and' it is, therefore, unnecessary to consider the actual pointa decided in the cases I have referred to or the decision in Maharaja of Benares v. Har Narain Singh A.W.N. (1905) 167 : 2 A.L.J. 585 which has also been cited with reference to Section 61 of the Contract Act. We rule that the plaintiffs are entitled to have the payments by them appropriated in discharge in the first place of all the interest due on the date of the payment and only after that in discharge of the principal then due.
20. The only other question is as to the exercise of the Subordinate Judge's discretion in not giving any interest from the date of the plaint until the date of decree. In the circumstances of this case in the exercise of our discretion, we are not prepared to alter the decree in that respect. The figures will be worked out on this basis and the figures arrived at will be substituted in the decree of the lower Court.
21. This appeal having been again posted to be spoken to this day with reference to the objections of the parties to the statement of account prepared by the office the Court delivered the following.
22. Judgment.--After hearing the objections, we confirm the statement of account.